Deane Dray: So just to clarify on China, that’s flat for the year. Is the expectation?
James Lico: Probably down low single for the year. So that would be our anticipation at this point. A couple of things there. Just starting what we’ve seen thus far is customers — a little bit more conservative, as I mentioned. As you know, Deane, we’ve talked about this over the years. You really don’t know China until you see March, you get out, you get to after the Chinese New Year, see how channel partners and customers are going to unfold for the year. We’ve seen more conservativeness up to this point, in the year. So our anticipation is that the year sort of progresses. We had a really tough comp in the first quarter in China. We had great growth in China last year in the first quarter but we would anticipate for the full year that China would probably be down about low single digit.
Deane Dray: Great. And just one clarification for EA. I believe you said that you were targeting 100 basis points of margin improvement for this year and that it would be the Tek sales force would be selling. Did they come with a sales force at all? And where is that 100 basis points? Is there any kind of manufacturing efficiencies? What are the drivers around the improved margins?
Charles McLaughlin: So Dean, a couple of things to unpack there. When we got EA and they just come with 40% incremental margin. I think the 100 basis points is about core growth that it adds to Tek, is what we called out. We would expect the volume growth that there’s, do they go from 40% to 41%? Yes, that wouldn’t be super surprising for them. But I think that was more about the impact on core growth for everyone for at Tek. And then on the sales force, I think Jim can give a…
James Lico: Yes. I mean if they came with about a sales force of roughly 40 folks. We 10x that with Tektronix. We have the ability to sell that solution across the board. The teams are working through their cross-selling strategies. And one of the things we said when we announced the deal was that we thought a real opportunity primarily outside of Europe to really accelerate the business through the addition of the Tektronix sales force. So yes, so as Chuck mentioned, already a very profitable company. They had great growth too; they’re a good growth company, a great growth company. And even with their size, they had growth at Tektronix and PT. So we’re excited about that opportunity. Obviously, that’s not the core for the year. That’ll be in ’25. So far, we really, we’re really excited about the business joining Fortive.
Operator: And your next question comes from the line of Andy Kaplowitz of Citigroup.
Andy Kaplowitz: Good afternoon, everyone. Chuck, maybe just a little more color on the expected AHS improvement in ’24. Could you talk about Fluke Health, they were discontinuing product lines in ’23, as you know, causing you some noise are they over the hump here in ’24? And when you look at ASP, I know you’re still building out your overall international infrastructure and supply chain. Are you over the hump there in terms of progress and how much restructuring is helping your margin in ’24?
James Lico: Why don’t I take the first part of that. Yes, Fluke help will probably be in the mid-single-digit range for the year, so pretty close to the segment growth, maybe a little bit less in the first quarter and a little bit better, or first half and a little bit more in the second half. So but they are through some of the things that you described as well.
Charles McLaughlin: With regards to the margin expansion, probably the bigger issue bigger driver behind the margin expansion at Health is the growth at ASP and the top line growth, getting through that just distribution and having Consumables in North America show up like they did in Q4. I think that’s probably I had to score 80% of what’s driving the margins there.
Andy Kaplowitz: That’s helpful, guys. And then maybe just a little more color on price versus cost expectation in ’24? I know you said price Chuck but one of your industrial peers report today and reported quite rocky results in terms of its handling of the global supply chain. It seems like Fortive is handling supply chain quite well. Pricing obviously remains sticky. But could you elaborate a little bit what you’re baking in for price versus cost and how you would rate the predictability at this point of the global supply chain?
Charles McLaughlin: Well, I think there’s a couple of things. In terms of the inflation we’re seeing, we’re seeing that come down and that’s why you’re seeing, the price we’re putting into the market come down. But we will expect to stay ahead as we always do on the price cost. To supply chains, that continue to get incrementally better every quarter but that doesn’t mean they’re back to what we would call normal and problems can crop up from time to time. But we think that incrementally better is what we see there. Remember, we’re not open to big commodity exposures that can cause maybe some of our peers or other companies that, we have a pretty good line of sight and great, every month, Jim and I are meeting with the OPCO teams hearing what we’re seeing on inflation but it’s trending the right way, meaning the rate of inflation is coming down.
James Lico: Yes. And I would just add the proof points. Our gross margin expansion over the last several years has been very consistent. I think that speaks to our ability to manage the situation, not just on the price side but on the cost side and our working capital continues to get better and as we noted, as a percent of sales. So we’re doing that while not having to have significant increases in working capital. In fact, our working capital is getting better. So we, I think what we’ll see this year Andy, just to add on to that is that our teams have done a really nice job. We were just with all of our teams, a couple of weeks ago and they’re doing a really nice job on design savings as well. So not only on the negotiated savings but also looking at design, what we call our value engineering effort.
And our value, I think we’ll have a, right now, our plans for value engineering would be, our cost reductions out of value engineering will be at a record in ’24 when we deliver on that through the year. So a number of things we’re doing to continue to stay ahead of price cost knowing that probably price wasn’t going to be able to stay at those levels that we had over the last few years. We’ve always been a good price company. So we’ll continue to get our fair share. But I think what we’re also trying to do is really push our teams hard on the opportunities on the cost side as well.
